B. Riley Cuts Tupperware Brands (TUP) to 'Sell' on FX Devaluations
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(Updated - November 28, 2016 9:41 AM EST)
B. Riley downgraded Tupperware Brands (NYSE: TUP) from Neutral to Sell with a price target of $47. Analyst Linda Bolton Weiser cut estimates to reflect foreign currency devaluations.
"We are lowering our estimates, target P/E, PT and rating from Neutral to Sell ahead of Tupperware’s (TUP) Nov. 29 monthly FX update, which we believe could result in Street estimate reductions," said Weiser. "The stock is +35% from its Jan. 27, 2016 low of $43.97 (S&P 500 +18%) and has not moved down much from its post‐earnings report level of ~$61 despite significant FX devaluations since the Nov. 8 election."
The analyst added, "We estimate TUP’s 2017 FX guidance could be reduced from +$0.03 to ‐$0.15‐$0.20, and are lowering our 2017E/2018E EPS from $4.87/$5.35 to $4.60/$4.90, below consensus of $4.69/$5.13. With the worsening FX backdrop, TUP’s decelerating organic sales growth (from +6% in 2013 to +2% in 2016E), only 50 bps of segment op. margin expansion over the last 4 years due to steady margin contraction in Europe and Beauty N. America (the latter will be barely profitable in 2016) and shrinking free cash flow in excess of dividends, we believe TUP could trade down toward the low end of its 5‐year historical forward P/E range of 9.2x‐15.6x. Therefore, we are lowering our target P/E from 12.0x to 9.5x and our PT from $64.00 to $47.00, based on 9.5x 2018E EPS of $4.90."
Weiser added, "TUP’s key foreign currencies have devalued an average of 4% since its last monthly FX update on Nov. 1 (see p. 2), when the FX impact on 2017E EPS was +$0.03. We are lowering our 2017E sales from +2.0% to ‐2.8% to reflect FX moving from +0.4% to ‐4.4%; our LC sales estimate is unchanged at +1.6%. We are lowering our 2017E EPS from $4.87 to $4.60, with the FX impact going from +$0.03 to ‐$0.17 and LC EPS growth lowered slightly from ~10.5% to ~9.5%."
Shares of Tupperware Brands closed at $59.28 yesterday.
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